WASHINGTON — With critical help from moderate Democrats such as Indiana’s Joe Donnelly, Congress is moving to ease some of the banking regulations imposed after the 2008 financial crisis.

The Senate is expected to begin debate Tuesday on a bill that the trade publication American Banker has called the industry’s best chance at rolling back financial regulations since the Dodd-Frank financial reform law was passed in 2010.

Donnelly is one of four Democrats on the Senate banking committee who worked with Republicans on the legislation that doesn’t go as far as a House-passed bill, but also doesn’t include consumer protections sought by other Democrats. It does include a provision Donnelly authored to help the manufactured housing industry, which has a large presence in northern Indiana.

Donnelly, one of the most vulnerable Democrats facing re-election this year, has been applauded for his efforts by bankers.

“Indiana’s own Sen. Joe Donnelly recently helped craft a bill that would provide significant regulatory relief for local credit unions and banks,” Kevin Ryan, president and CEO of Financial Center First Credit Union in Indianapolis, wrote in a recent opinion piece praising the legislation.

Radio ads paid for by the Credit Union National Association urged listeners last fall to "Tell Joe Donnelly you’re grateful for his leadership on common sense financial reform."

In addition to the public testimonials, Donnelly also received the second largest amount of campaign contributions from commercial banks to senators so far this election cycle, according to the nonpartisan Center for Responsive Politics.

But the legislation is opposed by consumer advocates like Indianapolis resident Carli Stevenson who says there’s no “groundswell of support among Hoosier voters for deregulating an industry that caused so much hardship in our state and caused so many foreclosures.”

“This is the kind of thing that sounds like a good idea, sounds like something (Donnelly) can use to show that he is a reasonable, bipartisan guy,” said Stevenson, a campaigner for Demand Progress, a liberal advocacy group that conducts online campaigns. “But it’s something that is not popular with anybody.”

The bill’s biggest change to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act would remove all but the largest banks from the act’s toughest restrictions. Supporters say too many institutions that weren't part of the problem got caught up in the rules.

Donnelly argues the changes will make it easier for families to get mortgages and for businesses to access capital.He has also touted a provision requiring credit report firms to give consumers unlimited, free credit freezes to prevent identity thieves from opening accounts in someone else's name. (That provision is a response to a massive data breach at Equifax, one of those firms.)

“This legislative package demonstrates that this committee, and the Senate as a whole, has within itself the ability to break through gridlock and solve difficult issues if we work together in good faith,” Donnelly said during the banking committee’s consideration in December.

During that markup, Donnelly was one of four Democrats who banded together with the panel’s Republicans to block changes sought by other Democrats. The bill’s supporters worried adopting the amendments — many of them consumer protections — would cause the underlying bipartisan agreement to break apart.

The rejected amendments included one to give back to consumers the right to sue their banks and credit card companies through class-action lawsuits. Congress voted last year to repeal a rule that blocked financial companies from requiring consumers to resolve disputes through individual arbitration proceedings. (In October, Donnelly joined all Senate Democrats in voting to keep the rule.)

The banking committee’s top Democrat, Ohio Sen. Sherrod Brown — who had earlier pulled out of the bipartisan negotiations over the bill — said the final version “does nearly nothing for consumers, while putting taxpayers at risk of another bank bailout and scaling back protections for homeowners.”

A provision Donnelly championed would affect buyers of manufactured homes.

The bill would exempt manufactured home retailers from restrictions on the loan information they can provide buyers under certain circumstances. A retailer would be allowed to recommend a specific lender. But the retailer would have to disclose any affiliation with the lender, must also provide information on a non-affiliated lender, and cannot be directly compensated by the lender for the recommendation.

Still, consumer advocates argue those protections aren’t good enough. Groups like the Center for Responsible Lending say, for example, that the protections would not prevent indirect incentives for steering loans, or prevent “deceptive oral presentations” on loan options. And buyers who get financing from affiliated lenders pay a lot more than they would from banks and other lenders, often receiving loans with unnecessary or deceptive add-ons, according to the National Consumer Law Center.

Advocates also say the change will undermine efforts to introduce much-needed competition within the extremely consolidated manufactured housing industry. They say private lenders who are being encouraged to offer financing for manufactured homes would be unlikely to get in the market if they think the retailers would steer business to existing lenders.

“This will hamper new lenders from getting in,” said Doug Ryan, senior director of affordable housing at Prosperity Now.

Ron Breymier, executive director for the Indiana Manufactured Housing Association, counters that the change will make it easier for buyers to get financing.

If a manufactured home is going onto leased land — such as in a mobile home park — instead of on a permanent foundation on land owned by the homebuyer, then financing is usually done through a personal property loan instead of a mortgage.

Under the current rules, Breymier said, the retailer can give the buyer a list of lenders, but can’t tell them which are more likely to approve a personal property loan. The result, he says, is potential buyers can hurt their credit rating applying to multiple banks for loans they’re unlikely to get.

“It’s much easier to actually tell them, `We know that this bank and this bank can provide (personal property loans),’” Breymier said. “They’re going to have choices from banks that they know are going to provide financing.”

About 5 percent of Indiana’s housing stock is manufactured housing, home to about 284,000 Hoosiers.

Indiana was the fourth-largest producer of manufactured homes last year, and Breymier said his group is “excited for the work that we know Sen. Donnelly has put into this.”

The heads of local banks have likewise complimented Donnelly, and argued that loosening the regulations will better help them serve customers.

George W. Ferriell, president and CEO of a small agricultural community bank in Bath, said his staff has been spending more time in the office, reviewing regulations, than out in the field with customers.

And First Savings Bank of Clarksville has had to reject a mortgage loan it would have previously been able to approve, because the current rules wouldn’t let the bank take into account income the client had received from a business sold on contract.

“At this point, we make too many business decisions based on regulations versus serving the client,” bank president Larry W. Myers said in a statement.

The banking industry has been supportive in other ways as well.

Donnelly received $140,360 in contributions last year from commercial banks, the second-largest amount to a senator from that industry, according to the nonpartisan Center for Responsive Politics. (North Dakota Sen. Heidi Heitkamp and Montana Sen. Jon Tester – two of the other banking committee Democrats who helped negotiate the bill – were the two other top recipients.)

A large chunk of the contributions to Donnelly came through employees of New York-based Signature Bank.

Asked if Donnelly’s work on the bill was a reason for the contributions, co-founder and board chairman Scott Shay said the bank supported Donnelly “because of his moderate views on all matters including immigration, and budget funding as well as in banking and other matters.”

“We think he is among the most bipartisan senators, and believe we need to support those who can work together to get things done and move the country forward,” Shay said in a statement.

The legislation appears to have enough support from Democrats to avoid a filibuster when the Senate votes Tuesday to call the bill up for debate. No House Democrat supported the version that passed the House last year, which would repeal large swaths of Dodd-Frank. So House Republicans will be under pressure to acquiesce to a bill that can get through the Senate.

Former Massachusetts Rep. Barney Frank, who co-authored the 2010 legislation, recently told The Washington Post he opposes the bill, but would rather see vulnerable Democrats like Donnelly vote for it and get re-elected, than oppose it and lose in November.

Donnelly is touting the support the bill has from state groups including the Indiana Chamber of Commerce, Indiana Credit Union League, Indiana Bankers Association, Indiana Mortgage Bankers Association, Indiana Association of Realtors, Indiana Manufactured Housing Association, and Indiana Builders Association.

But Stevenson, the campaigner for Demand Progress, said the Indiana groups backing the bill represent business interests, and not rank-and-file Hoosiers.

“What we’ve been focused on is calling out the Democrats that are in support of this bill,” she said. “I want my senator to do better on this issue.”

Contact Maureen Groppe at mgroppe@gannett.com. Follow her on Twitter: @mgroppe.